Happy Friday! Brian Manning here with the weekly update. Let's get right to it. So, Monday this week was a relatively quiet news day, because we knew we had some big inflation data coming out. So, really all eyes were just waiting on the inflation data.

Tuesday this week though, we got some home appreciation info. So, Black Knight puts out a report. There's a handful of providers of this information, but Black knight came out and said, home appreciation was up 7/10th of a percent in the month of May. And it's starting to push back to all-time highs. And if you look at the calendar year of 2022, home appreciation was up 6%. So... Still really strong numbers there.

We also got CoreLogic. They came out, they give us feedback on home appreciation, also, for the month of May. CoreLogic said homes are up 9/10th of a percent in the month of May. They anticipate appreciation in the month of Jun to be up 1%, and they anticipate appreciation going forward over the next twelve months to be up 4.5%. You had all these people talking about housing is going to crash, real estate is a horrible investment, housing is going to collapse on us.

Here we are, 7/10th of a percent 9/10th of a percent increase, 1% anticipated for next month. So, housing is resilient. It's holding really strong. We truly think that January was the inflection point. We truly think that the low of the housing market was from Q4 pushing into January because from February going forward, we've seen nothing but home appreciation month-over-month, and we're on track for 5, 6, 7% appreciation this year, which is really solid and we're super excited to see that.

Wednesday this week, we got the CPI report. I've been waiting for this report. CPI stands for Consumer Price index. It's a wonderful gauge of inflation. So, CPI came back, this is for the month of June. We really had a feeling this is going to be a very impactful report. Impactful, excuse me, report and helpful for inflation and mortgage rates. So... On a month-over-month basis, inflation was down 0.18 of a percent. On a year-over-year basis, inflation moved down from 4% down to 3%, which is extremely impactful. It's a huge move. The Core rate moved down from 5.3% to 4.8%.

Personally, I think the all-in inflation is really more accurate than Core because Core rate excludes volatile items such as food and energy. But all of us go to the grocery store and shop for food. All of us put fuel... Well, not all of us. Some people have electric cars. A lot of people put fuel in their cars. You know, airplanes operate off fuel. All these different mechanics operate off fuel. So, fuel is definitely an expense we're all experiencing. So, I truly think the headline is a better number to look at and to go from 4% down to 3% on a year-over-year basis is phenomenal. That's a huge move lower inflation, which is definitely helpful for mortgage rates.

So, why did this move? A couple of items. So, we had new cars. On a month over-month basis, new cars went up zero, they were flat, which is really good to see. So, you're starting to see the auto market calm down. Used cars were down half a percent. This is really good to see because I think last month used cars are up like 4.4%. That's not sustainable. You cannot have used cars increasing that much. So, to see that move lower, that puts us, used cars depreciating now or down 5.2%. That's normal. We should definitely be seeing that.

We also had airline costs coming down. Airline costs were down 8.1% on a month-over-month basis, 19% year over year. Really good to see this because travel costs have been very expensive. So, to see the costs come down there is really important as well. One item we've talked about a lot and we're going to look at more here is going to be shelter costs. So, shelter costs were only up, you know, almost 4/10th of a percent. Shelter costs moved from going up 8% year-over-year to 7.8% year-over-year. We'll talk about that more in a minute.

We had rents come down, which is great to see. You know, this owner equivalents of rent are astringed one to have in here to make up such a large percentage of CPI. Owner equivalents of rent is like saying if you own a home right now and you're going to rent it, how much will you rent it for? And that factors into the inflationary numbers and then, lodging away from a home move lower as well, which is really good to see. So... You know, looking at this... we've seen the Consumer Price index really crest and start to come down. Again, this is the driver of mortgage rates. Inflation is the arch enemy of mortgage rates. So, to see inflation come down is really good and promising to see the benefits we're experiencing the marketplace here.

Another item we want to look at is shelter costs. So, shelter costs are really lagging. You know, they make up like 43%, 43.5% of the CPI rate, which is a huge number to be impacting inflationary report and you can see shelter costs really crested like January, February, January 22, and now, they're down much lower. The problem is it's a lagging report so it takes a while for the numbers to catch up because this is looking at people that sign leases anywhere from like 12 to 16 months ago. So, if you look here, you see shelter costs peaked and come down real time. Shelter costs are lower. We've been waiting for this.

Shelter costs finally... really peaked a couple of months ago in the CPI report. And now, you've seen the crest, you've seen it start to come lower. So, as the shelter costs catch up again because it's lagging by 12 to 14 months and you continue to see shelter costs move lower, lower, lower in line with more real-world numbers right now, that's going to continue to help the CPI and it's going to continue to help mortgage rates and it's going to continue to push mortgage rates lower.

We also got the PPI report. PPI stands for Producer Price Index. This measures inflation at a wholesale level. This is an extremely low number. It doesn't always mean that the costs on the wholesale level are going to pass on to uses consumers, but is a leading indicator. So, the orange line here is PPI. So, usually when wholesale costs, for example, go up, first, the cost of creating goods increases, then, you saw the CPI number go up as well.

Well, now, you see the PPI number dropping and you see the PPI number at an extremely low level. Almost no inflation right now in PPI, and you're seeing the CPI number come down as well. So, it's really good to see inflation coming in check. You know, it's been twelve months of really solid reports for inflation right now, and we're super excited to see that.

Thursday this week, we also got the Zillow Home Price Index for June. This was up 1.4%. May was also up 1.4%. So, still Zillow telling us that we had really solid appreciation as well. Today, we get Fed governor, Waller talking about rate hikes. He says that he doesn't think that inflation has moved nearly enough and he's in favor of just coming out blazing guns, hiking rates over and over and over. But I don't know what these people are looking at. We have twelve months of meaningful inflation. You know, we're seeing the impact of their Fed rate hikes. We're seeing inflation come down. We've seen shelter crush. We're seeing shelter move lower. You know, sometimes, you just got to take a step back, let the rate hikes do what they're going to do, see what happens in the economy and go forward from there.

But man, sometimes, I just don't know what these people are watching because they're saying that, you know, inflation is still out of control. Yes, it's high and yes, it's coming down. Yes, it's not plummeting to the bottom and it takes a while for inflation to move. It's a slow-moving train, but we are seeing favorable movement there. I'm around all weekend. If you have any questions, give me a call. If you want to learn how we're closing purchase transactions in ten days, reach out to me. I'd love to help you. Happy Friday. Have a great day.

-Brian

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